After the market turmoil to start the week, there may be even more hope riding on some bullish updates from blue-chip companies.
With little in the diary from London's FTSE giants (apart from one vehicle component supplier, see below), it will be a long wait before we hear from Microsoft Corporation after the closing bell in New York on Tuesday.
Following on from Netflix’s weak quarterly numbers last week, the Silicon Valley titan's earnings continue what could be an intense few days for the market, and should be of keen interest to the many UK private investors who now delve into the US investment scene.
READ: Attention turns to other FAANG companies as Netflix shares plummet
"The hope going into earnings season was that companies were going to settle the nerves,” said market analyst Craig Erlam at Oanda. “That we were about to get a reminder of the strength of the economy and the resilience we've seen over the last couple of years. Instead, the results have been rather disappointing.
“The banks didn't give us much to cheer about and if the Netflix results are anything to go by, big tech may also underwhelm.”
Second-quarter results from Microsoft will come fairly hot on the heels of its US$69bn mega-deal to buy video games maker Activision Blizzard.
Back at the time of its Q1 results, cloud services were the main attraction for the company, growing 50% compared to 16% for its gaming arm.
Microsoft also said it hoped to benefit from rising inflation, suggesting that as businesses looked to eke out more efficiencies they would flock to its cloud products.
Analyst Dan Ives at broker Wedbush remained optimistic, said he believes Microsoft’s cloud momentum is “still in its early days”, with the transition for both consumers and businesses “providing growth tailwinds over the next few years”.
But showing how there's plenty riding on these numbers, analyst Sophie Lund-Yates at Hargreaves Lansdown said: “The market’s hopes will be high, as it’s become accustomed to Microsoft’s stellar results.”
Fluid auto market
TI Fluid Systems PLC (LSE:TIFS) is one of the few FTSE-listed companies providing access to the electric vehicle (EV) market and on Tueday it is planning to open the bonnet on a year-end trading update.
While the car parts supplier's trading performance has been pretty consistent and the company has large potential opportunities in the electric vehicles market, it is perhaps best known to investors for planning a £27mln dividend in 2020, despite furloughing staff and agreeing pay cuts.
The dividend was never paid out, but this was mainly because 54% shareholder Bain Capital eventually nixed the plans, with Oxford-based TI later saying it would first repay the furlough money its employees received from British taxpayers before starting to pay dividends.
Then in December, Bain sold a £100mln stake at 250p per share, with its shareholding now reported to stand around 36.7%.
If that is ignored, the investment case was put forward by the company at a capital markets day last year, where it said its ‘content per vehicle’ (CPV) for a petrol-powered car was up to €200, while for a hybrid EV is €700 and a battery EV is €400.
But for now, expect to hear news of auto supply chain and semiconductor issues.
Chancellor’s purse strings
The main item on the day's UK macroeconomic agenda will be public sector net borrowing numbers, which will give an insight into how much leeway chancellor Rishi Sunak has to fund increasingly critical new subsidies such as household energy bill relief.
The UK borrowed £17.4bn in November 2021, down £22.2bn a year earlier and forecasts for December are for a rise closer to £19bn.
Public sector net borrowing this fiscal year so far shrank to £136bn in November, which was £115.8bn below the same period in 2020 but still nearly three times the same period in 2019.
Significant announcements expected on Tuesday 25 January:
Trading updates: Capricorn Energy PLC, TI Fluid Systems PLC (LSE:TIFS) (TI Fluid Systems PLC (LSE:TIFS))
AGMs: Greencore Group PLC (LSE:GNC) (Greencore Group PLC (LSE:GNC))
Economic data: Public Sector Net Borrowing (UK)